It can be challenging to listen to the wisdom of the generations before us (we all have to make our own mistakes, right?), but there are some key credit lessons that are long overdue their time in the spotlight.
Here are six credit lessons we wish our parents had taught us.
1. Paying interest is painful. Really, really painful
Let's be real: making monthly credit card payments isn't fun. But the pain (literally) compounds when you top off your monthly bill with interest payments. With many credit cards carrying an interest rate above 12 percent, missing even one payment can result in a large (and painful) interest payment.
If Mom had said something closer to, "Paying interest is like scraping your knee in the same spot every day," the message may have sunk in a little deeper.
2. Even a half-a-percentage interest rate reduction matters
Negotiating isn't always on the docket for financial literacy programs, but it's worth mentioning: Some numbers carry more wiggle room than you'd expect. When opening a new line of credit, negotiate your rates. While you may not always get your asking interest rate, you and your lender could very well land on a number lower than the original offer.
And, yes, even a .5 percent reduction matters when it comes to paying interest. A $1,000 loan with a 17 percent interest rate reduced to a 16.5 percent interest rate would save you $5 a month. That's a latte, a beer, or, in a year, a pair of shoes.
3. Credit can offer greater protections against fraud
Quick, what's the safest way to make a purchase: cash, credit, or debit? Answer: credit.
Don't worry, I didn't know either.
Choosing to use a credit card instead of swiping your debit card can offer greater protections against fraudulent purchases. Most credit card companies will remove fraudulent purchases as soon as you alert them to unusual/suspicious activity. Credit cards also cap your liability at $50. Claiming fraud for a debit purchase, on the other hand, may require you to file a more complicated claim -- and fraudulent purchases may not be reimbursed for up to two weeks.
4. Credit doesn't build itself
This one may sound annoyingly similar to Mom's "The bed won't make itself!" shtick. But really, credit doesn't build itself.
Be proactive when building credit. A good credit score can save you a lot of money in the long run. For instance, strong credit can help you lock down lower interest rates and empower you to make large financial decisions like taking out a mortgage (when it makes sense!).
A smart way to start building your credit is to start soon and start small. Make small purchases using a credit card and then immediately pay these purchases off. Better yet, start with a secured credit card. The "small beans" approach to minor, easily paid purchases can help build good credit habits early on.
5. Credit limits aren't "suggestions" (and a 30 percent credit utilization rate goes quickly)
Opening that first credit card can often be confused with scoring a windfall at the bank. But being approved for a $2,500 credit line doesn't mean you have $2,500 at your beck and call. In fact, credit bureaus recommend that you stick below a 30 percent credit utilization rate. That means spending only up to 30 percent of your credit line.
To avoid maxing out your credit (or spending above your means), be deliberate in the way you use your credit card for purchasing. Additionally, enter every purchase with a game plan by asking, "What's my timeline for paying this loan back? Is it realistic?"
6. A financial philosophy can help make or break your credit score
"Everything will work out in the end." How many kids have heard this oft-repeated parental mantra? It's short and sweet (and true in the grand scheme of things).
Unfortunately, it doesn't translate when you're trying to negotiate an overdue credit card bill with your lender. It's crucial to tack down a financial philosophy as you begin your financial journey. Having a clear (and actionable) financial philosophy will guide you as you make financial decisions.
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.